Investment guide – Hassle free high yield investing
We’re huge fans of property investing and giving property investors the education and information they need to make informed investment decisions. In today’s world, it can be hard to find an investment that pays a decent return. Twenty or thirty years ago, as your financial advisor was encouraging you to think about investing for your retirement, pension plans promised a future of high yield investments and capital growth that would sustain your lifestyle in your golden years. Now that dream has become a nightmare.
However, you don’t have to resign yourself to a retirement of low income and low capital growth. While traditional investing in residential property beats all other investments, if you want to create a no-fuss, instant stream of income, buy to let may not be for you.
In this article, I’m going to investigate an investment opportunity that you may not have considered – hotel rooms. First, I’ll look at the problems that traditional investment vehicles pose if you’re seeking income (or capital growth). Then I’ll look at why an investment in a hotel room is such a great high yielding opportunity.
The need for high yield investments
You’ve saved for most of your life toward retirement. You may even have had the romantic notion of semi-retiring in your late fifties. Taking life a little easier. Living – at least partly – off the income from your savings and pension schemes.
It wasn’t so long ago that you could bank on getting an income of around 8% or more on your cash savings. Those days have long gone. For every £10,000 in cash savings that you had 20 years ago, you’d have earned around £800 in interest. Now you’d be lucky to make that income with ten times the amount of savings.
Those plans of early retirement suddenly look years away. Forget the retirement cruise you always promised yourself. The trip to Florida for the grandchildren will have to be put on ice, too. It looks like you’re going to have to tighten your belt quite some way just to make ends meet.
To have any chance of earning a decent income from savings, UK and ex-pat investors need high yield investments. The problem is that they are few and far between today. That’s why investing for high yield from UK hotel rooms looks so exciting.
What are your investment opportunities for income today?
The traditional routes of investing for income are pretty much shot-to-shreds. Now, 4% is considered by many advisors to be a high yielding investment. We don’t agree, but let’s look at what’s out there for those considering investing for high yield.
Short changed by the stock market
Shares will pay you a dividend yield of around 3% or 4%. Of course, you have the potential of capital growth – but what if you want to retire and the market crashes? Even today, the FTSE100 is variable and doesn’t give you the certainty most investors crave.
Risk not rewarded in corporate bonds
The income on high yielding corporate bonds is eroding, too. As interest rates crumble, companies don’t have to offer as much to borrow from investors, despite the potential for the investor to lose his entire investment if the company goes bust.
Governments and banks are no longer an income option
Government bonds pay next to nothing, and with cash savings rates dropping like a stone (even Santander’s headline saving grabbing rate of 3% is being slashed to just 1.5% in November), you can’t expect to earn you income in either bonds or deposit accounts. Governments and banks are effectively borrowing your money for next to nothing.
So just where do you go for a high yielding investment that’s stable and secure?
A new way to invest in property and leisure
I say a new way, but the ability to invest in hotel rooms has been around for quite a while. Now, it’s more sophisticated than it used to be. For a unique, high yielding, hassle free investment, a hotel room or two could be just what you’re looking for to fund your retirement.
Forget the 4% return on the traditional annuity. Hotel room investment will pay an income of around double that amount. And you get a real asset that can be sold on or bequeathed should you wish.
The interest on your cash savings of £75,000 (around £750 if you’re lucky) won’t even pay for a decent family Christmas. Put that cash into a buy-to-let hotel room, and the potential £6,000 income will pay for the whole family to go to Disneyland – grandchildren included.
Better still, when you buy a hotel room you’re buying a slice of two growth industries – property and leisure.
Hassle free buy-to-let
You may have thought about buy-to-let property as an income producing investment. But there are some drawbacks with buy-to-let residential property that put some investors off. These include:
- You may have to spend a lot on looking for and vetting tenants
- You’ll have property maintenance and repair costs to pay
- Over the next few years, the way that buy-to-let is taxed could hurt your cash flow projections
- Cheap buy-to-let mortgages are becoming more difficult to find
An investment in a hotel room takes away all of the hassle associated with buy-to-let:
- Hotels are incredibly good at marketing their product – it is their business, after all
- Great way to balance and restructure your portfolio to maintain yield
- Maintenance and repair work is ongoing and part of the management’s remit: you won’t get a call from a disgruntled guest complaining about a dripping tap at two in the morning
- You won’t need a mortgage to invest and start earning and reaping your rewards
An investment for income with capital growth
One of the features of the UK property market in recent years is that residential buy-to-let yields have been falling while property prices have been rising. House prices have fared incredibly well over the last 20 years. According to the Nationwide House Price Index, In the 20 years to 2016, the average UK house price almost quadrupled.
If you want to invest for income, even the yield on residential buy-to-let is falling. According to Zoopla and Lendinvest, the average rental yield in the UK is now only 5%. High yielding buy-to-let residential property often comes with another kind of price tag – cheaper properties in run down areas tend to attract the wrong type of tenant.
More often these days, we’re seeing buy-to-let investors whose main priority is capital growth. But you want a strong, steady income stream. How does 8% hassle free sound?
An investment into a hotel room is an investment for income. The value of the hotel may rise and fall, but the leisure industry and our need for accommodation will continue to grow. This fuels the demand for hotel rooms and underpins investment for high yield income.
Investing for high yield in a growing industry
The hotel industry is big. Strike that, it’s HUGE. According to Statista, hotels are forecast to generate global revenues of $550 billion in 2016. The average daily rate in Europe is $126 (around £90).
Here in the UK, the hotels business is thriving. In London, occupancy rates in 2015 hit 84% with the average daily rate (ADR) hitting £142. In 2016, the ADR is expected to rise to £145 with occupancy remaining steady. In the regions, it’s expected that occupancy rates will rise to 77% in 2016 from 76% in 2015, with the ADR rising by 3.5% year-on-year to £69. (You can see the.)
To put this into perspective:
- The average hotel room in a UK provincial town will generate £19,389 of gross ‘rental’ income in 2016
- The average hotel room in London will generate £44,370 of gross ‘rental’ income in 2016
This is cash flow that you could be getting a slice of right now. No waiting for tenants to be vetted. No costly advertising. No unexpected repair and maintenance bills. No hassle.
When you buy a hotel room, you really are buying a hassle free, high yield investment.
Book a chat or Contact us on +44 (0)207 923 6100 to discover our current hotel room opportunities. With an investment from just £60,000, you could be earning an assured return of 8%, with a capital growth of 15% over five years.
Yours in property investing